Sales of existing homes in October jumped significantly above expectations, rising 4.3 percent from September and 26.6 percent year-on-year to a seasonally adjusted annual rate of 6.85 million units, according to the National Brokers Association.
NAR’s chief economist, Lawrence Yun, called the annual increase a “spectacular gain.”
The annual sales rate is the highest since February 2006. The highest rate was in 2005 of 7.1 million units.
The data reflect closed sales, representing contracts signed in August and September.
Yun forecasts sales of existing homes to increase by 10% to 6 million in 2021.
Sales could probably be stronger if there were just more available for sale. At the end of October, there were 1.42 million existing homes on the market, which is a 19.8% decrease compared to October 2019. At the current sales rate, this is a 2.5-month supply, the lowest reported. The last time the sales rate was at the current rate, the supply of homes for sale was twice as high as the current one.
The extreme shortage of homes for sale adds more fuel to the fire in house prices. The average price of an existing home sold in October was $ 313,000, up 15.5 percent a year. This is the highest registered average price and reflects the far stronger sales at the top of the market. Home sales of more than $ 1 million nearly doubled, while sales fell to the lowest price range.
Historically low interest rates have been helping buyers, but lately prices have been so high that they no longer have the power they once did to really increase affordability. And low rates may not last much longer.
“Mortgage rates may take into account in the coming months and test the strength of this seemingly unstoppable housing market,” Daniel Hale, chief economist at realtor.com, said. that both buyers and sellers pause their plans in areas where the spread of coronavirus is prevalent.While buyers are relatively quickly resumed, sellers are returning more slowly.
Regionally, month on month, sales in the northeast increased by 4.7%. In the Midwest, they increased by 8.6%, and in the South they increased by 3.2%. In the West, they have grown by 1.4%.
Investors remain strong in the market, accounting for 14% of sales, compared to 12% in September.
The severe shortage of existing homes for sale is extremely beneficial for home builders in the country, who have noticed a very strong demand. Mortgage applications for the purchase of newly built homes increased by nearly 33% annually in October, according to the Mortgage Bankers Association.
Unfortunately, the start-up of single-family homes is not increasing enough, especially not in the lower price categories. In addition, permits for single-family construction were flat for the month of October, according to the US census. Permits are an indication of future construction.
“The cost of volatile materials and the lack of available land continue to keep builders from taking real steps,” said Matthew Spickman, an economist at Zillow. “And the flat permitting activities show that the future pipeline of the project is not exactly overcrowded.”